The purpose of this paper is to assess and compare the symmetric and asymmetric effects of consumer sentiment on house prices in each state of the USA. This is the first study that uses state-level data.
Both linear and nonlinear autoregressive distributed lag approaches are used to assess the asymmetric effects of consumer sentiment on house prices in each state of the USA.
When the authors estimated a linear symmetric model, this paper found short-run effects of consumer sentiment on house prices in 34 states that lasted into the long-run in only 13 states. The comparable numbers by estimating a nonlinear asymmetric model were 47 and 22, respectively. The increase in the number of states where consumer sentiment affects house prices was attributed to the nonlinear adjustments of consumer sentiment.
The authors deviate from previous research and assess the impact of consumer sentiment on house prices by using data from each state of the USA. The authors also deviate from previous research by demonstrating that the effects could be asymmetric. No study has done this at the state-level.
